Planning for California s 2030 Emissions Reduction Goal Partnership for Market Readiness Workshop San José, Costa Rica Mary Jane Coombs California Air Resources Board 7 December 2016
State of California >39M people Decades-long history of protection of public health 6 th largest economy in world (up from 12 th largest in 2012) 2
Directives and Legislation Climate Change Scoping Plan required by Assembly Bill 32 (2006 legislation) Included an economy-wide Cap-and-Trade Program Executive Order B-30-15 (2015) and Senate Bill 32 (2016) Establish GHG emissions reduction target of 40% below 1990 levels by 2030 Requires Air Resources Board to update the Scoping Plan to incorporate the 2030 greenhouse gas target Assembly Bill 197 (2016) directed ARB to: Consider the social costs of GHG reductions Prioritize measures resulting in direct emissions reductions Follow existing AB 32 requirements including considering costeffectiveness and minimizing leakage 3
Objectives for Scoping Plan Policies Achieve 2030 target and position state to meet 2050 target Provide direct GHG emissions reductions Minimize emissions leakage Support cost-effective and flexible compliance Support U.S. EPA Clean Power Plan (CPP) Support climate investment for programs in disadvantaged communities Provide air quality co-benefits and protect public health Facilitate sub-national and national collaboration 4
California GHG Emissions Sources by Sector 1990 level of 431 MMTCO 2 e* *https://www.arb.ca.gov/cc/inventory/pubs/reports/staff_report_1990_level.pdf 5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 GHG Emissions (MMTCO 2 e) California GHG Progress to Date (as measured by emissions inventory) 500 475 Total GHG Emissions 450 425 2020 Limit 431 400 https://www.arb.ca.gov/cc/inventory/inventory.htm 6
Role of Models in the Scoping Plan Help analyze GHG impacts of policies and technology, including future projections Help understand cost impacts of different policies Several models exist to support these types of analyses PATHWAYS REMI Estimates GHG reductions and direct technology, energy, and fuel costs of the scenarios Integrated economic and energy sectors to reflect interactive effects Models the economic impact of GHG reduction scenarios on the California economy Uses technology and fuel costs from PATHWAYS as an input Estimates the indirect and induced impacts of GHG reduction scenarios Provides estimates of impact of scenarios on industrial sectors, individuals, and overall California economy 7
2030 Baseline Policies and Measures 2030 GHG emissions estimated to be ~300 MMTCO 2 e for baseline policies and measures 50% renewables by 2030 and doubling of building energy efficiency Implementation of the Short-Lived Climate Pollutant Plan Sustainable community development Mobile Source Strategy--helps State achieve its federal and State air quality standards Low Carbon Fuel Standard Sustainable Freight Action Plan 2030 baseline policies and measures do not achieve the 2030 target of 260 MMTCO 2 e 8
Reference Scenario 671 MMTCO 2 e cumulative reductions required to achieve 2030 limit Reference Scenario (BAU) 260 MMTCO 2 e State s 2030 Goal 9
Closing the Gap Consider legislative direction and Scoping Plan objectives Potential options to fill remaining gap: Enhance and extend existing programs New policies and regulations Evaluated three draft scenarios All three scenarios rely on a mix of measures Draft Scoping Plan scenario (includes Cap-and-Trade Program) No Cap-and-Trade Program (Alternative 1) Carbon Tax (Alternative 2) 10
Draft Scoping Plan Policy Scenario 2030 Baseline Policies and Measures New Refinery Efficiency Measure for All Facilities in the Sector Fewer GHG emissions per barrel of refined product Estimated to achieve 20 percent GHG reductions by 2030 Post-2020 Cap-and-Trade Program 11
Scenario Policy Analysis: Draft Scoping Plan Benefits Majority of reductions due to baseline policies and measures New measures delivers refinery facility GHG emissions reductions Cap-and-Trade Program constrains emissions through a declining emissions limit and scales to provide additional reductions if other measures do not perform as expected Provides compliance flexibility and allows for continuation and expansion international and subnational collaboration through linkages Free allocation to minimize emissions leakage where needed Provides auction proceeds for GHG reductions Can be adapted for compliance with federal Clean Power Plan Drawback Ongoing differing legal interpretations about authority. 12
Alternative 1(No Cap-and-Trade Program) 2030 Baseline policies and measures 60 percent Renewables Portfolio Standard 25 percent Low Carbon Fuel Standard 30 percent GHG reduction for refineries by 2030 25 percent GHG reduction for all other industrial sectors by 2030 Early retirement and replacement of older inefficient gasoline light-duty vehicles and furnaces 5 percent renewable gas standard for natural gas suppliers Heat pumps in buildings 13
Emissions (MMTCO2e) Preliminary GHG Modeling Results: Alternative 1(No Cap-and-Trade) 550 500 450 400 350 300 2020 Target Reference Scenario Population and energy demand overtake rate of reductions and emissions start to grow 250 2030 Target Alternative 1 200 150 100 2010 2015 2020 2025 2030 Note: January SP Draft will demonstrate how to achieve the 2030 limit for Alternative 1 14
Benefits Scenario Policy Analysis: Alternative 1(No Cap-and-Trade) Under ideal conditions, estimated to deliver more cumulative emissions reductions than needed to achieve the 2030 limit (but emissions start to increase in later years) Majority of reductions due to enhanced known commitments New measures deliver refinery and industrial facility GHG emission reductions Drawbacks New statutory authority is needed for some policies and measures Fewer options for minimizing emissions leakage Limited opportunities for international or subnational collaboration through linkages No auction proceeds to fund emissions reductions Need additional funding for new incentive programs---(e.g. retiring & replacement of older cars) Would need to identify other measures for compliance with federal CPP 15
Alternative 2 (Carbon Tax) 2030 Baseline Policies and Measures New Refinery Efficiency Measure for All Facilities in the Sector Fewer GHG emissions per barrel of a refined product Estimated to achieve 20 percent GHG reductions by 2030 Carbon tax post-2020 16
Emissions (MMTCO2e) Preliminary GHG Modeling Results: Draft Scoping Plan Scenario or Alternative 2 550 500 450 400 350 300 250 200 2020 Target Reference Scenario 2030 Target Draft Scoping Plan Scenario or Alternative 2: ~88-98 MMTCO 2 e reductions required from Cap-and-Trade Program or carbon tax to close the gap. 150 100 2010 2015 2020 2025 2030 17
Scenario Policy Analysis Alternative 2 (Carbon Tax) Benefits Majority of reductions due to known commitments New measure delivers refinery facility GHG emissions reductions Provides compliance flexibility Could provide revenue for emissions reductions, or for other uses 18
Scenario Policy Analysis: Alternative 2 (Carbon Tax) Drawbacks Carbon tax does not include an explicit emissions limit (i.e., does not guarantee reductions) If reductions aren t realized, additional measures need to be implemented quickly to make up unrealized reductions New statutory authority is needed Options to minimize emissions leakage are unclear (include exemptions for trade exposed sectors, putting burden on other sectors for GHG reductions) May not achieve reductions beyond the known measures No clear path for international and subnational collaboration through linkages Potential for additional GHG reductions at covered entities Does not include an enforceable mandate as required by U.S. EPA to reduce emissions at the stack - would need to identify other measures for compliance with CPP 19
Next Steps Identify the structure of the carbon tax in Alternative 2 Collaborate with Economic Reviewers and stakeholders Continue to refine cost estimates Capital costs Incentives for retirement and replacement Address uncertainty in GHG reductions and costs Analyze economic impact on disadvantaged communities Release full Draft Scoping Plan in January 2017 Board vote on Final Scoping Plan in Spring 2017 20
For More Information Scoping Plan website https://www.arb.ca.gov/cc/scopingplan/scopingplan. htm Draft 2030 Target Scoping Plan Updatehttps://www.arb.ca.gov/cc/scopingplan/2030t arget_sp_dd120216.pdf Mary Jane Coombs California Air Resources Board mcoombs@arb.ca.gov 21